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They may sound similar, but a late payment and a missed payment aren't the same thing. A late payment is one that's made after the due date but before the billing cycle ends. If it continues to go unpaid after that, this missed payment will likely be added to your credit report and hurt your credit score. Creditors tend to deal with late and missed payments in different ways. Understanding how it works can help you protect your credit.
What Is a Late Payment?
A late payment happens when you make a payment after your account's official payment due date. If you have credit cards or loans, this date should be the same each month. What matters most is making your payment as soon as possible. If you don't make a payment before the billing cycle ends, it will likely be viewed as a missed payment, and your account could go into delinquent status.
There are different levels of delinquency, and every creditor is unique. Some may give borrowers a grace period of several days or weeks to make a payment before they consider the account delinquent and report this information to the three credit bureaus (Experian, TransUnion and Equifax). Even if it doesn't go that far, you can expect late fees.
What Is a Missed Payment?
If you haven't made a payment during an entire billing cycle, which is typically 30 days, it's considered a missed payment. The creditor will likely report this negative activity to the credit bureaus, and it will appear on your credit reports and likely damage your credit scores. It's wise to bring your account back into good standing as soon as you can to avoid other unwanted consequences, like a loss of credit card rewards or an increased interest rate.
When Does an Account Go Into Default?
Your account could go into default if you stop making good on your payments and the account becomes severely past due. The process varies depending on the account and lender, but here's what the default timeline typically looks like:
- Mortgage loans: After a single missed payment
- Credit cards and personal loans: Three to six months after a missed payment
- Most federal student loans: 270 days after a missed payment
| Late Payment vs. Missed Payment | ||
|---|---|---|
| Late Payment | Missed Payment | |
| What is it? | When you make a payment after the due date but before the billing cycle ends | When you fail to make a payment during the account's billing cycle |
| How do creditors respond? | Some give borrowers a grace period to make a payment, though you'll likely be charged a late fee | Creditors typically report missed payments to the credit bureaus after 30 days of nonpayment |
| How can it affect my credit? | Generally won't affect your credit | A single missed payment will stay on your credit report for seven years |
How Do Late Payments and Missed Payments Affect Your Credit?
The most important factor is how far behind you are on payments. It's important to note that a single missed payment will stay on your credit report for seven years—even if you get back on track with your payments. Restoring your account's good standing can help you avoid further damage to your credit. Below is a breakdown of how late and missed payments may affect your credit:
- Less than 30 days late: A late payment made within the billing cycle, usually 30 days, should have no effect on your credit as it will not be reported to the credit bureaus.
- 30-plus days late: The effect will depend on your credit history and whether this is a regular occurrence or an isolated incidence. If you have strong credit, a single missed payment could cause a significant drop in your credit score. If you already have a history of missed payments, chances are your score has already suffered damage and may not drop as much with a single 30-day late payment.
- 60-plus days late: A late payment that's made 60, 90 or 120 days after the due date will probably have a greater impact on your credit—especially if you have multiple past-due accounts. Most creditors charge off (or close) accounts that have been delinquent for six months. A charge-off is another derogatory entry on your credit report. If the creditor sells the debt to a collection agency and the agency reports payments to the credit bureaus, that will create another derogatory entry.
How to Avoid Late and Missed Payments
Here are a few simple ways to avoid late payments and keep your accounts going strong:
- Set up payment due date reminders on your phone or calendar.
- Enroll in autopay.
- Maintain a strong budget and plan ahead for your debt payments.
- Revisit your budget if you experience a drop in income or new expenses.
- If you think you might miss a payment, contact your lender ASAP to see if they can work with you.
The Bottom Line
A late or missed payment is never ideal, and a severely past-due account can significantly impact your credit. The good news is that you can take steps to remedy the situation—and improve your credit score going forward. Free credit monitoring with Experian can help by alerting you to changes to your credit report—both good and bad.
